Unemployment

* Basic definition: a person is willing to work, but cannot find work

- measurment of unemployment in the US

-> a person is out of work, but has sought work in the past six weeks

=> does NOT count people who have given up hope, since they aren't looking

+> as people re-enter the work force they drive unemployment up even as jobs are being created

=> does NOT count people who are "underemployed" (unable to get enough hours)

=> does NOT count the "underground economy" or under-the-table work

=> including discouraged workers tends to increase the unemployment rate significantly

+> there is no standard measurement of discourage and standard unemployment

-> unemployment rate is a percentage of the work force

=> usually, 4 or 5% unemployment is considered "full employment"

+> some workers are shifting jobs intentionally, but haven't yet signed on (frictional unemployment)

+> some industries/businesses have failed and workers must get new jobs

=> unemployment above 7% becomes politically damaging

=> unemployment above 10% leads to social unrest generally

- unemployment in other countries

-> European unemployment rates tend to be higher, but they count workers planning to seek work as unemployed

=> European unemployment benefits are more generous (and expensive), leading to less pressure to lower unemployment

-> Developing countries often have very high levels of unemployment regularly

=> endemic (constant high) unemployment is a drage on development

=> leads to cycle of needing foreign aid

* Causes of unemployment

- cyclical changes in the market (GDP fluctuation - cyclical unemployment)

-> businesses shed workers during recessions and depressions

=> overly-low unemployment leads to inflation, leading to lay-offs

+> some unemployment is thus necessary to keep wages from spiraling up

- creative destruction of industries

-> when new technologies or techniques make an industry obsolete, jobs disappear

-> globalization of work, also causes unemployment in countries with replaceable expensive labor

- growth of the labor supply in a stagnant economy

-> if population grows, but economy doesn't create enough new jobs, unemployment rises

- regulations about labor distort the labor market (classic unemployment)

-> minimum wage and other labor rules do discourage some hiring

- unemployment insurance/benefits

-> with no unemployment benefits, people would have no choice but to take any job offered

- Structural unemployment

-> long-term unemployment makes people effectively unemployable

=> these people do not have up-to-date skills

=> their resumés have ugly looking gaps in employment, making the uncompetitive

=> they are discouraged and are unlikely to be perceived as having a good attitude

-> people residing in areas with poor economies are trapped

=> insufficient local jobs can create local recessions and depressions

=> growing up with poor education can leave one permanently harmed

=> without money, education, or social connections one cannot move to where the jobs are

+> social benefits make survival possible, but create incentives against work

=> racism, gender discrimination, and discrimination based on sexual preference can lead people to be unable to find work

- health problems may knock a person out of work

- unwillingness to accept diminished work opportunities